The Types of Insurance Coverage Every Individual With a Car Should Know About

Are you aware that in the U.S., nearly 13% of motorists are uninsured? This means millions are on the road without protection in case of a crash. When you operate an automobile, you need the proper insurance. However, with so many kinds of coverage, it can be confusing to determine precisely what you need. Learn about the various types of automobile insurance so you can decide for yourself.

1. Liability Insurance

The simplest type of auto insurance is liability insurance. It pays for injuries or losses to someone else if you cause an accident. Most states require liability insurance. Understanding minimum auto insurance coverage is needed as every state sets limits on how much liability insurance you must carry.

The coverage consists of two parts:

• Bodily Injury Liability: Pays for medical costs, lost earnings, and legal expenses if you harm someone in a crash.
• Property Damage Liability: Covers the cost of repairing or replacing another person’s automobile or property.

2. Collision Coverage

Collision coverage pays for repairs to your automobile if it is damaged in a crash. This type of insurance covers damage to another car or an object, such as a tree or a pole. If your vehicle is totaled (too damaged to be repaired), collision insurance pays for its current value.

This coverage is optional. However, if you have a loan or lease on your vehicle, your lender may require you to have it.

3. Comprehensive Coverage

Comprehensive insurance compensates for damage to your automobile that is not caused by a crash. This includes:

• Natural disasters (storms, flooding, fires)
• Theft
• Vandalism
• Falling objects (such as tree branches)
• Hitting an animal

Like collision insurance, comprehensive coverage is optional unless your lender requires it. However, if you want full protection for your vehicle, you should consider this coverage.

4. Uninsured/Underinsured Motorist Coverage

Although automobile insurance is required in many states, too many drivers have little or no insurance. If an uninsured or underinsured driver hits you, you may have to pay for your own medical expenses or repairs. This is where uninsured/underinsured motorist coverage helps. It covers:

Your medical costs if an uninsured driver hits you

Damage to your car if the at-fault driver is not covered

This coverage is essential because accidents involving uninsured drivers occur more frequently than you might think.

5. Personal Injury Protection (PIP)

Also referred to as no-fault insurance, Personal Injury Protection (PIP) covers medical costs for you and your passengers, regardless of who caused the accident. In certain states, PIP also covers:

Lost wages if you cannot work due to injuries

Funeral costs (in case of death from an accident)

Services you cannot perform due to injuries, such as childcare or housekeeping

PIP is required in some states and optional in others. If you live in a no-fault state, you likely have this coverage.

6. Medical Payments Coverage (MedPay)

MedPay is similar to PIP but covers only medical costs. It does not pay for lost wages or other expenses. If you have medical insurance, you may not need MedPay, but it can help with co-pays and deductibles.

7. Gap Insurance

If you have an automobile loan or lease, consider gap insurance. If your vehicle is totaled in a crash, regular insurance pays for the car’s current value, which may be much less than what you owe on your loan. Gap insurance covers the difference, so you don’t end up paying for a car you no longer have.

8. Rental Car Reimbursement

Rental car reimbursement pays for a temporary rental if your car is in the shop after a crash. This coverage is optional but can be beneficial if you rely on your car daily.

9. Roadside Assistance

Roadside assistance is another optional add-on that helps if your vehicle breaks down. It covers services such as:

Towing

Battery jump-starts

Flat tire changes

Lockout assistance (if you lock your keys in the car)

Fuel delivery (if you run out of gas)

If you do not already have this service through a membership (such as AAA), you should consider it.

Final Thoughts

Car insurance is a legal requirement in many states and it is also essential for your financial security. Understanding the different types of coverage helps you choose the right protection.

When selecting the best insurance, consider:

Your state’s minimum requirements

Whether you need collision or comprehensive coverage

Your budget and coverage level

The risks you may face, such as driving in areas with many uninsured drivers

Knowing the types of auto insurance will help you make the best choice for yourself, your car, and your budget!